SB35 Explained…

We all hear about SB35 all the time, the favorite law invoked by HDD developers and the City Council wringing their hands about being forced by Big Bad Brown Governor to build High Density Housing against their will, but as it turns out, (surprised?) financially beneficial to them!

So I took it upon myself to get information at the source, to read the entire text of SB35 and extract the most relevant sections and provide my most honest interpretation. Now, I am not an attorney and I cannot offer any warranty that all of my analyses are 100% correct, but I did my best to apply balanced logic and fairness.

In my honest opinion, some members of the Huntington Beach City Council and Planning Commission (if I must spell it out, the trio Posey/Delgleize/Kalmick) believe the citizens of HB are fools who cannot read or think and can be taken for a ride in furtherance of their personal interests and agendas.

So here is my modest contribution to this subject (at the price of 2 cups of coffee and 2 Advils). This article also contains links to very important statistical information about Huntington Beach that I recommend you spend some time perusing, you will be surprised about how interesting and eye-opening this information can be! I have also included a link to the full text of the SB35 law from the official website of the State of California.Please note that I am neither for nor against SB35, I do not have enough state-wide information to make a determination as of whether it’s a good law or not. My goal here is to show how this law is used as a crutch by developers and city officials to push their HDD agendas to the detriment of the people.

Bear in mind that SB35 at its core is an incentive by the state to promote building of affordable housing by providing a “fast-track” permitting process for developers and municipalities that fully comply with its requirements. In other words, it saves them money, and lots of it since permitting process in general can be not only very time-consuming, but also very expensive.

SB 35 PREAMBLE: (2) Existing law requires an attached housing development to be a permitted use, not subject to a conditional use permit, on any parcel zoned for multifamily housing if at least certain percentages of the units are available at affordable housing costs to very low income, lower income, and moderate-income households for at least 30 years and if the project meets specified conditions relating to location and being subject to a discretionary decision other than a conditional use permit. Existing law provides for various incentives intended to facilitate and expedite the construction of affordable housing.

In this paragraph, “very low, low and moderate income” requirements correspond for a household in HB to:– $58K/year or less for “very low”– $67k/year or less for “low”– $85k/year or less for “moderate” (“median” household income in HB)This represents roughly 65% of HB population. Now let’s see how much of a house price or rental these categories can afford, based on current rental and lending standards:– Very low income: $1.2K/month rental or less than $175K purchase– Low income: $1.4K/month rental or less than $200K purchase– Moderate : $2.0K/month rental or less than $255K purchaseI did a quick Zillow search today. These numbers do not exist in HB except for tiny 1BD apartments, mobile home residences, or using the roommate system.

In other words, to comply with the intent and the letter of SB 35, developers should build apartments or condo complexes matching the prices above. They do not. We all know all new development is for small, expensive luxury units between $600K and $1M purchase price or $3-4K/month rental value or more.SB35 requires that 10% of units built match affordability requirements for households of “very low income” and that 50% of units match affordability requirements for “low income” households. Naturally, we want everybody to find a good home, but the economic reality in HB’s desirable areas just does not work out for households making less than $100K/year. To cut a long story short, compliance with SB35 in HB is out of the question, because of the manner in which incomes are distributed, with 65% on the low end and 35% on the high end ($110K and up), with virtually no “middle-ground” revenue area.

Developers, City Council and Planning Commission’s insistence to follow SB35 that is imposed upon them “deus ex machina” by Sacramento is just Kabuki! There simply are no development projects in HB that would qualify for SB35 incentives. So how is SB35 “tying the hands” of developers, City Council or Planning Commission, since it cannot be applied to luxury high-density development. Would they be trying to exploit Sacramento’s inefficiency or lack of resources to verify and “slip one by them”, saving lots of permitting time, money and obtaining otherwise impossible variances in the process?

(3) The bill would make findings that ensuring access to affordable housing is a matter of statewide concern and declare that its provisions would apply to all cities and counties, including a charter city, a charter county, or a charter city and county.

For people who think charter cities are exempt, they are not!

(4) By imposing new duties upon local agencies with respect to the streamlined approval process and reporting requirement described above, this bill would impose a state-mandated local program.The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This is a loophole: it allows cities to get state money for so-called “reporting compliance” with SB35.

SECTION 1 (S65400 OF GOV CODE):(D) The number of net new units of housing, including both rental housing and for-sale housing, that have been issued a completed entitlement, a building permit, or a certificate of occupancy, thus far in the housing element cycle, and the income category, by area median income category, that each unit of housing, including both rental housing and housing designated for home ownership, satisfies. That production report shall, for each income category described in this subparagraph, distinguish between the number of rental housing units and the number of for-sale housing units that satisfy each income category. The production report shall include, for each entitlement, building permit, or certificate of occupancy, a unique site identifier, which must include an assessor’s parcel number, but may also include street address or other identifiers.

This mandates that projects must be already permitted, and comply with the “very low, low and moderate income” requirements. Rented units and units for sale also must be be consistent with legal requirements (10% for “very low” income, 50% for moderate income, see above paragraphs for details).

1-F-b:(b) If a court finds, upon a motion to that effect, that a city, county, or city and county failed to submit, within 60 days of the deadline established in this section, the housing element portion of the report required pursuant to subparagraph (B) of paragraph (2) of subdivision (a) that substantially complies with the requirements of this section, the court shall issue an order or judgment compelling compliance with this section within 60 days. If the city, county, or city and county fails to comply with the court’s order within 60 days, the plaintiff or petitioner may move for sanctions, and the court may, upon that motion, grant appropriate sanctions. The court shall retain jurisdiction to ensure that its order or judgment is carried out. If the court determines that its order or judgment is not carried out within 60 days, the court may issue further orders as provided by law to ensure that the purposes and policies of this section are fulfilled. This subdivision applies to proceedings initiated on or after the first day of October following the adoption of forms and definitions by the Department of Housing and Community Development pursuant to paragraph (2) of subdivision (a), but no sooner than six months following that adoption.

Another loophole: this allows cities and developers to whine that they are obligated to do so, they would be, if their projects fell under the provisions of the law. So they are trying to trick the state of California into believing they are building “affordable housing” per SB35 specifications, they are not, they are building high-density luxury dwellings that are not “affordable” per the very letter and intent of the law.

More loopholes: they allow the City/developers to make legal actions against HDD projects prohibitively expensive! For the wrong reasons, of course, since the projects we are talking about here are out of general compliance requirements to begin with.

Section 3 – 65913.4(3) If the development contains units that are subsidized, the development proponent already has recorded, or is required by law to record, a land use restriction for the following applicable minimum durations:(A) Fifty-five years for units that are rented.(B) Forty-five years for units that are owned.

This is essentially not enforceable, the state does not have enough personnel to do so. So “rental” units will quickly be converted into small luxury units for sale.

(B) The development is subject to a requirement mandating a minimum percentage of below market rate housing based on one of the following:(i) The locality did not submit its latest production report to the department by the time period required by Section 65400, or that production report reflects that there were fewer units of above moderate-income housing approved than were required for the regional housing needs assessment cycle for that reporting period. In addition, if the project contains more than 10 units of housing, the project seeking approval dedicates a minimum of 10 percent of the total number of units to housing affordable to households making below 80 percent of the area median income. If the locality has adopted a local ordinance that requires that greater than 10 percent of the units be dedicated to housing affordable to households making below 80 percent of the area median income, that zoning ordinance applies.(ii) The locality did not submit its latest production report to the department by the time period required by Section 65400, or that production report reflects that there were fewer units of housing affordable to households making below 80 percent of the area median income that were issued building permits than were required for the regional housing needs assessment cycle for that reporting period, and the project seeking approval dedicates 50 percent of the total number of units to housing affordable to households making below 80 percent of the area median income, unless the locality has adopted a local ordinance that requires that greater than 50 percent of the units be dedicated to housing affordable to households making below 80 percent of the area median income, in which case that ordinance applies.(iii) The locality did not submit its latest production report to the department by the time period required by Section 65400, or if the production report reflects that there were fewer units of housing affordable to any income level described in clause (i) or (ii) that were issued building permits than were required for the regional housing needs assessment cycle for that reporting period, the project seeking approval may choose between utilizing clause (i) or (ii).

This is the very crux of the whole matter, very important stuff. The paragraphs above essentially define the price range for sale or rental and mandates 10% of units for low income bracket and 50% units for moderate income bracket (again per household, not individual). As we have seen above, this works out for HB to prices for 60% of units to be from under $255K (with 10% under $190K) or $1,200 – $2,000 rent levels, that we have seen do not exist in HB except to tiny apartments or mobile homes and NOT, repeat, NOT new “luxury” HDD units in the areas where the big projects are planned.

(5) The development, excluding any additional density or any other concessions, incentives, or waivers of development standards granted pursuant to the Density Bonus Law in Section 65915, is consistent with objective zoning standards and objective design review standards in effect at the time that the development is submitted to the local government pursuant to this section. For purposes of this paragraph, “objective zoning standards” and “objective design review standards” mean standards that involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official prior to submittal. These standards may be embodied in alternative objective land use specifications adopted by a city or county, and may include, but are not limited to, housing overlay zones, specific plans, inclusionary zoning ordinances, and density bonus ordinances, subject to the following:(A) A development shall be deemed consistent with the objective zoning standards related to housing density, as applicable, if the density proposed is compliant with the maximum density allowed within that land use designation, notwithstanding any specified maximum unit allocation that may result in fewer units of housing being permitted.(B) In the event that objective zoning, general plan, or design review standards are mutually inconsistent, a development shall be deemed consistent with the objective zoning standards pursuant to this subdivision if the development is consistent with the standards set forth in the general plan.(6) The development is not located on a site that is any of the following:(A) A coastal zone, as defined in Division 20 (commencing with Section 30000) of the Public Resources Code.…(C) Wetlands, as defined in the United States Fish and Wildlife Service Manual, Part 660 FW 2 (June 21, 1993).(G) Within a flood plain as determined by maps promulgated by the Federal Emergency Management Agency, unless the development has been issued a flood plain development permit pursuant to Part 59 (commencing with Section 59.1) and Part 60 (commencing with Section 60.1) of Subchapter B of Chapter I of Title 44 of the Code of Federal Regulations.(H) Within a floodway as determined by maps promulgated by the Federal Emergency Management Agency, unless the development has received a no-rise certification in accordance with Section 60.3(d)(3) of Title 44 of the Code of Federal Regulations.(I) Lands identified for conservation in an adopted natural community conservation plan pursuant to the Natural Community Conservation Planning Act (Chapter 10 (commencing with Section 2800) of Division 3 of the Fish and Game Code), habitat conservation plan pursuant to the federal Endangered Species Act of 1973 (16 U.S.C. Sec. 1531 et seq.), or other adopted natural resource protection plan.(J) Habitat for protected species identified as candidate, sensitive, or species of special status by state or federal agencies, fully protected species, or species protected by the federal Endangered Species Act of 1973 (16 U.S.C. Sec. 1531 et seq.), the California Endangered Species Act (Chapter 1.5 (commencing with Section 2050) of Division 3 of the Fish and Game Code), or the Native Plant Protection Act (Chapter 10 (commencing with Section 1900) of Division 2 of the Fish and Game Code).

This excludes large sections (especially coastal) of HB from qualifying for the incentives under SB35 because the subsidized housing could not be built in many areas, due to the requirements and exclusions stated above. In other words, the “requirement to comply” touted by our headless leaders is just wind.

SEC. 5. Each provision of this measure is a material and integral part of this measure, and the provisions of this measure are not severable. If any provision of this measure or its application is held invalid, this entire measure shall be null and void.

This is a very important clause, and a quite unusual one, if you are familiar with most business contracts and legal dispositions.What this means is that any legal argument to fight parts of this law will have to be strong enough to cause the entire law to be repealed. An extremely high legal burden, not within the means of a small entity, such as a City to overcome against the state attorneys.

I welcome a frank and honest debate on this subject, High Density Development has already disfigured parts of what used to be an original, vibrant beach city with a soul. I fully support any initiative to ease the burden of the less fortunate among us to be able to live in HB and to enjoy its uniqueness, but such will must be implemented to everyone’s benefit, not just to provide a “quick-buck” opportunity to greedy developers.

It is really sad to see young people, HB native, being pushed away from their home town by greedy developers churning out one Misery-By-The-Sea factory after another, without providing the necessary infrastructure to support the added population and burdening our collective future, with a “quick-dollar for me and screw everyone else” attitude.

Progress does not stop, development is necessary, but it must be balanced and follow a deliberate plan to benefit HB residents first. Instead, we see the City Council and the Planning Commission abdicating their obligations to serve HB residents, all of us, for the benefit of the chosen few who dump money into their election coffers.

They made bad decisions in the past, they have burdened us with a pension system for city employees that instead of being well managed and future-proofed has been be left hanging at the mercy of Wall Street fluctuations and is costing us a fortune. So sure, now they are salivating at the prospect of seeing their mistakes erased by immediate income from HDD and getting off the hook, our quality of life and future be damned notwithstanding.

They are responsible for their gullibility and incompetence, and should be held accountable in November. Time to “regain control”, if you catch my drift…